Again, at what price? There will be civil unrest in Europe over energy and food prices. A deep recession is inevitable. Europe is not over the hump. What fantasy world are you living in?
Hopes for a “mild recession” in Europe this winter have been abandoned by Deutsche Bank strategists, who have dramatically slashed their 2023 growth forecasts.
The economists explained what they see as a persistent competitiveness threat from the gas crisis. First, countries will see output losses from gas consumption cuts and this will amplify through supply chains. The drag from higher energy prices may then hit real incomes, then comes the uncertainty shock and finally second-round impacts via trade.
“The near-term impact this winter will be most affected by the extent of rationing — whether through enforced cuts or price-based mechanisms — as well as uncertainty effects on consumer and firm behavior,” they said.
And while the impact of gas demand cuts has been moderate so far, Deutsche Bank warns it will worsen this winter as countries move into the heating season. They see Germany and Italy most at risk, given the reliance those countries have had on Russian gas. German GDP is expected to drop 3.5% in 2023, and Italy is forecast to see a 2% decline, with a recession and higher rates also a threat to Italian stability. General elections will be held September 25.
While less impacted by a gas shock, countries such as France and Spain will still be exposed to a “deepening real income squeeze, competitiveness of higher energy prices and contagion via trade.”
The economists seemed unable to see any near-term light at the end of the tunnel.
“Beyond the winter, the expected U.S. recession next year and the tightening of financial conditions on the back of the ECB’s more front-loaded hiking cycle will limit the speed of the recovery during the remainder of 2023. We see quarterly growth moving above potential only in Q2 2024,” they said.
Russia is screwed.
Oil and gas are global commodities. China and India are becoming alternate markets for Russian energy,
China spent a record-breaking $8.3 billion importing Russian oil products, gas, and coal in August, official customs data showed.
Chinese buyers have now purchased a record-breaking $44 billion of Russian energy in the six months since President Vladimir Putin's forces invaded Ukraine in February. August's fuel spend rose 68% when compared with a year prior, according to the customs data.
Look for Scholz to sign long term LNG contracts in next couple of days.
“German Chancellor Olaf Scholz is set for a two-day visit to the Middle East on Sept. 24-25 where potential LNG supply deals with the UAE and Qatar are expected to be high on the agenda.”
RuZZia has limited ability to export nat gas to Asia.
Its been covered on FR a number of times.
Oil on the other hand can be shippped easily. But oil prices are way down. If there is a global recession, oil prices are going even lower.
Again, at what price? There will be civil unrest in Europe over energy and food prices. A deep recession is inevitable. Europe is not over the hump. What fantasy world are you living in?
Nobody said kicking Russian corruption and influence out of Europe would be cheap or unwind easily. They’ve spent decades and billions of dollars corruptly buying influence in Europe.
We are living in President Trump’s world. He’s spoken many times about the importance of this and his policies back that up.
“ Again, at what price?”
Again, at high price.
Hundreds of millions, perhaps billions of people will be made poorer because of the brutal aggression and atrocities of Putin and his willing accomplices. Surrendering to that would be disgracefully cowardly, and only invite more such aggression.
Putin did this. He is a monster who must be defeated, whatever the cost.
Again, the bottom line is that the industrial democracies have knowingly accepted to pay the costs, approved by their legislatures with overwhelming bi-partisan support. Russia is screwed.
“Oil and gas are global commodities. China and India are becoming alternate markets for Russian energy”
Of the gas that went to Europe last year (then 85% of Russia’s gas exports), only 4% can be physically shipped to other customers. If China’s 7% of last year’s volume doubles, that is small consolation. Many years and massive investment would be needed to develop Eastern fields or pipelines thousands of miles long, to bring much more than that to Chinese market. But Russia is now cut off from the capital markets and technology to do it. Russia is screwed.
Russia has inherently higher oil production and transportation costs (the highest of any major producer), and now it’s higher transaction costs under sanctions, make Russian oil even less competitive in a commodity market. That is why it’s sales to India just came to a dead halt.
https://oilprice.com/Energy/Crude-Oil/Why-India-Is-Suddenly-Buying-Less-Russian-Crude.html
Russia’s normally weak competitive position in the oil market, is made significantly weaker by the added expenses of current sanctions, but stronger secondary sanctions are coming in December, if not sooner, because of the mobilization escalation. Global recession is coming fast and hard. On an objective price basis, Russia will absorb the lion’s share of the drop in demand.
Russian oil exports made up about 7% of last year’s global oil export volume. Recessions typically reduce global demand 5-15%. This one looks like it will be a bad one, based on the energy shock, and the harshest Central Bank tightening in a half century. Swing producer Russia is so screwed. Like once in a century screwed.
Putin did that.